The 2024 American Express CFO Survey, a survey of global finance chiefs, revealed improving cash flow as the top priority for this year, cited by a resounding 81%. Tellingly, just 24% are looking to reduce expenses to enable this, a stark contrast to last year’s findings, when 89% of CFOs highlighted cost-cutting as a pressing need.
While cash flow was also a key area of concern in last year’s survey, the motivations have shifted, from risk avoidance and cost reduction to a more positive drive towards growth and innovation. CFO’s priorities might change, but understanding the vital importance of healthy cash flow remains, providing the foundations for businesses to navigate uncertainty as well as seize opportunities and expand.
1. Improving margins
Among CFOs citing cash flow as a strategic priority for 2024, 41% identified improving margins as a tactic for achieving this goal. Profit margin is a key indicator of cash flow efficiency, and improving this figure can support a business’ growth and development.
One key way in which profit margins can be improved is by increasing efficiency. For example, companies can automate customer orders or warehouse picking, enabling them to increase speed and accuracy while freeing up resources to carry out more complex tasks. Our survey shows a growing recognition of the benefits of harnessing technology in this way, revealing that 36% of finance leaders globally plan to increase automation in their organisations.
Customer satisfaction is another powerful tactic and is critical to retention and driving repeat transactions. Well-documented research by Bain & Company shows that increasing customer retention rates by 5% increases profits by 25% to 95% [1]. This is because returning customers tend to buy more from a company over time. After all, they are familiar with the brand or product, and they trust it. Organisations can use retention and satisfaction data to inform their strategy, improving service, product quality and loyalty programmes, and therefore boosting profits.
Productivity is also central to maximising profit, and optimising this can range from ensuring staff have the right skills, training and equipment to carry out their roles, to ensuring machinery or technology is well-maintained and up-to-date.
The most effective ways to increase profit margin will vary depending on the company and industry, and can also include renegotiating with suppliers to agree better deals, optimising the product offering to prioritise the most profitable items, or even raising prices.
However, any increase in profit margin will help to improve cash flow, in turn enabling companies to grow.
2. Growing sales
Positive sales growth generally indicates an efficient operation with a strong product or service and a high degree of customer confidence, and achieving this will vary depending on the company, sector and audience. However, several overarching strategies can help organisations to grow sales.
At the heart of this is understanding the customer, from identifying challenges and pain points to wants and needs, enabling companies to hone their products, customer service and marketing. By engaging with customers, gathering data, and listening, organisations can ensure their brand, product and service are on point, building confidence and loyalty and driving sales, as well as generating positive word of mouth.
A granular knowledge of the audience and its needs can also enable businesses to identify new markets, whether demographically or geographically, allowing it to reach a wider audience of people with similar wants and needs.
Lowering prices can increase sales too, but companies must be careful to find the optimum price point, attractive enough to encourage more buyers and offer value without undermining the quality, but high enough to ensure a healthy profit margin. Getting this right will also depend on other factors such as customers’ spending power, product demand and competitor pricing.
Incentives can also boost sales, such as loyalty programmes, free shipping or limited edition offers, while free or discounted product samples can help to convert new customers to a new brand, thereby increasing sales.
Of course, reducing barriers to purchase can have a positive impact on sales, and with the continued growth in online shopping. The UK e-commerce market is estimated at USD$280.55bn in 2024, and is expected to reach USD$750.80bn by 2029 [2], ensuring a slick online experience is key. This can include enhancing website navigation, offering a fast checkout with sufficient payment options, investing in SEO to ensure a high search ranking, and embedding customer reviews to promote trust and instil confidence.
Increasing sales enables both inventory and accounts receivable to expand, in turn improving cash flow.
3. Improving payment systems
Nearly a third (29%) of CFOs in our survey plan to improve payment systems as a means of improving cash flow. This is an area which is rapidly evolving, with Capgemini forecasting that there will be 2.3tn cashless transactions worldwide by 2027, compared to 1.3tn last year, making up approximately 30% of total volume [3].
Payments are doubtless becoming increasingly digital (our survey shows that 40% of CFOs say digital payments will be important to their business, rising to 62% in India and 59% in Spain), and the growing interest in payment gateways — encryption systems which enable businesses to accept electronic payments — is telling, with 53% of CFOs in our survey stating that they are interested in the potential of these platforms.
New digital payment formats are continually emerging, and organisations must stay abreast of trends and possibilities if they are to facilitate customer payments, drive efficiency and, ultimately, improve cash flow.
For example, in February 2024, more than half (53%) of UK consumers purchased products online using PayPal, while 30% used Apple Pay [4]. These mobile wallets speed up transactions and increase security and are well-established globally.
Echeques, which transfer funds electronically in the same way as a paper cheque, only digitally, are also of increasing interest in the UK, with our survey showing that 50% of CFOs believe they will be important to their business in 2024.
In the US, biometric payments, which authenticate transactions using secure biometric data such as fingerprints, are becoming more common. Amazon is a good example, installing ‘pay by palm’ at its Whole Foods stores last year [5].
With one in five (21%) CFOs claiming that lack of internal data is a challenge that hinders strategic goals, the transparency and real-time insights enabled by digital payments could be a boon. With many finance leaders (37%, rising to 56% in Germany) also stating that cash flow is likely to be a KPI, access to such powerful data could prove pivotal.
Why cash flow continues to be a top priority for CFOs
Cash flow is an enduring priority for finance leaders, driving financial stability, informing strategic decision-making and ensuring liquidity. In an uncertain world, albeit with fears of a global recession receding, CFOs who master cash flow can focus on growth and build resilience to future risks.
Download the 2024 American Express CFO Survey to learn more about global CFOs' attitudes towards cash flow and other issues impacting the finance function.
Sources:
[1] Bain & Company, Prescription for Cutting Costs
[2] Mordor Intelligence, UK E-Commerce Market Size, 2024
[3] Capgemini, Global non-cash transaction volumes set to reach 1.3 trillion in 2023, 2023
[4] EMarketer, UK Digital Wallets 2024, 2024
[5] CNBC, Amazon to launch pay-by-palm technology at all Whole Foods stores by year-end, 2024
